What are the rules regarding electronic distribution of income data forms for tax reporting in the United States?

Question

This is specific to the United States, but hopefully that's not too localized. For those not familiar with the W-2 form, it is a brief statement reporting income and tax data that people employed in the U.S. receive from their employers. It is for use in preparing income tax forms.

Last year a contract change forced me to change employers. Recently I received email from the old employer informing me that my W-2 is available via a web site. It has long been my understanding that there is a requirement for companies to hand out or mail physical copies of W-2's to its employees. Is that understanding in error, or has the rule been changed, thus allowing electronic distribution of W-2's? I have searched via Google and on the Internal Revenue Service (IRS) web site, but haven't found anything.

URL's backing up answers would be much appreciated.

Answer 1

Is that understanding in error, or has the law been changed, thus allowing electronic distribution of W2's?

From the IRS website, as of January, 2013:

Furnishing Form W-2 to employees electronically. You may set up a system to furnish Form W-2, Wage and Tax Statement, electronically. Each employee participating must consent (either electronically or by paper document) to receive his or her Form W-2 electronically, and you must notify the employee of all hardware and software requirements to receive the form. You may not send a Form W-2 electronically to any employee who does not consent or who has revoked consent previously provided.To furnish Forms W-2 electronically, you must meet the following disclosure requirements and provide a clear and conspicuous statement of each requirement to your employees.

• The employee must be informed that he or she will receive a paper Form W-2 if consent is not given to receive it electronically.

• The employee must be informed of the scope and duration of the consent.

• The employee must be informed of any procedure for obtaining a paper copy of his or her Form W-2 and whether or not the request for a paper statement is treated as a withdrawal of his or her consent to receiving his or her Form W-2 electronically.

• The employee must be notified about how to withdraw a consent and the effective date and manner by which the employer will confirm the withdrawn consent. The employee must also be notified that the withdrawn consent does not apply to the previously issued Forms W-2.

• The employee must be informed about any conditions under which electronic Forms W-2 will no longer be furnished (for example,
  termination of employment).

• The employee must be informed of any procedures for updating his or her contact information that enables the employer to provide
  electronic Forms W-2.

• The employer must notify the employee of any changes to the employer's contact information.

You must furnish electronic Forms W-2 by the same due date as the paper Forms W-2. For more information on furnishing Form W-2 to employees electronically, see Regulations section 31.6051-1(j).

Section 31.6051-1(j) appears to be here if you are interested in some light reading. Search for "(j)" if you want to actually find the relevant section.

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This is definitely legal, however, it appears employees must give consent for this to be acceptable for the IRS.

A disclaimer too: there is a mountain of paper and legal work related to this as you surely know. This is not intended to be legal advice of any sort.